When deals are really just "overpriced offerings"

[David C.]

To the group:  As more and more "deals" cross my desk and I perform underwriting, I find that the vast majority of these deals are simply overpriced offerings - even in lousy locations, Cap Rates are around 3-4%.  Most offerings have minimal meat on any of the bones, and by the time financing is factored in, it cripples the cash flow, sometimes into the negative.  It's amazing to see what are being called "deals" these days.

[Alexander Felice]

Cap rates are compressed right now, and mania is in the air. 

I just sold a property that didn't make money to someone who paid far more than me. Maybe rent increases will save him, but there is nothing in my market that would suggest such a thing to happen. 

Everyone is a playing a different game. Some people need to make big returns, some people just need to spend capital, some people have access to different debt, some people need to show losses. Some people are willing to overpay for a deal just to say that they closed something on social media. 

Everyone has different reasons for buying